Archives for February 2024

In a blog post published January 29, 2024 titled “The CFPB’s enforcement work in 2023 and what lies ahead,” the CFPB discussed its 2023 enforcement activity and highlighted its plans to expand its enforcement capacity in 2024.

The CFPB indicated that in 2023, it filed 29 enforcement actions and resolved through final orders 6 previously-filed lawsuits.  Orders in these matters required the respondents to pay approximately $3.07 billion in consumer redress and approximately $498 million in civil money penalties.  The CFPB’s blog post includes brief descriptions of key 2023 enforcement actions.  (Our blog posts about several of these matters can be found here, here, here, here, and here.)

The CFPB also highlighted its plans to significantly expand its enforcement capacity in 2024.  The additional staff members that the CFPB plans to hire include enforcement attorneys as well as non-attorneys such as analysts, paralegals, e-litigation support specialists, and economists.  The new staff members will be located in the CFPB’s Washington, D.C. headquarters and in its San Francisco, New York, Chicago, and Atlanta regional offices.  The CFPB also promoted an information session that it held yesterday for potential applicants to learn more about the Office of Enforcement’s work and job opportunities.

Effective skip tracing
strategies have evolved alongside changing regulatory requirements and
technological advances. Today, debt collectors can access robust data sources in
real-time to power automated prioritization and collection strategies.

For example, an alert indicating
a consumer opened a new account or is using a new phone number could send them
to the top of your queue. You can then contact via phone or text message with a
link to your self-service portal to request that they start a payment plan.

Verifying and continuously
monitoring consumers’ contact information is important when building automated systems
for collections.  The same capabilities can also increase your
right-party contact (RPC) rates with live agents, emails, and physical letters,
which is important, especially when resources are constrained.

What skip tracing solutions can help?

A comprehensive skip tracing strategy
goes beyond increasing right-party contact rates. While having the most
up-to-date contact information is important, you also need tools that can help
you prioritize accounts.

We recommend:

• Phone Number ID^™ — Scrub and score phone numbers
  based on the likelihood that the number belongs to the account holder at the
  beginning of the debt cycle.
• TrueTrace^™ — Find new phone numbers with scores based
  on quality.
• Email append — Validate and scrub email addresses; find the
  latest ones to attach to accounts.
• Collection Triggers^℠ — Passively
  monitor accounts for new contact information and changes that indicate a
  consumer is now able to make a payment.

Let’s take a closer look at each.

Phone Number ID™

This robust contact-management
process can help you maintain RPC rates and meet compliance requirements. Phone Number ID verifies consumers’ phone
information in real-time, including:

• Subscriber name
• Carrier
• Line type
• Activation date
• Whether the number was moved from a landline

With connections to over 5,000
carrier exchanges, there’s a 97-percent hit rate. If the carriers don’t have a
name associated with that number, Experian will attempt to identify the owner
using its proprietary databases before sending you a complete profile.

Use Phone Number ID to monitor
your accounts and serve as a quality scrub. You can choose which categories to
monitor and receive daily updates if there’s a change.

Phone Number ID also delivers a
match score (0 to 99) based on the likelihood the phone number belongs to the
correct owner.  This score can help you
optimize your outbound communication and stay compliant.

For example, even if you have
the right phone number, at best you might achieve a RPC 15 to 20 percent of the
time. A high score might tell you that it’s worth continuing to reach out until
the consumer answers.

On the other hand, a low score
might indicate it’s a bad number. You might try it once or twice, but then send
it to skip tracing and move on if you don’t make contact. Additionally, you
might want to avoid texting numbers that were recently moved or have a low
score to reduce the risk of Telephone Consumer Protection Act (TCPA) violations.

READ: A Digital Debt Collection Future: Maximizing Collections and Staying Compliant

TrueTrace^™ and
TrueTrace Live^™

TrueTrace and TrueTrace Live are
Experian’s most powerful locating solutions and a follow-up solution to Phone
Number ID. We’ve seen TrueTrace achieve a 10-percent lift in RPC rates compared
to competing products.

The improvement comes from
Experian’s proprietary matching process and access to multiple high-quality
data sources that are frequently updated:

• Experian’s consumer credit file
• Clarity Services alternative and payday lending
  bureau
• Experian® RentBureau® property management data
• Directory assistance data
• Public data sources

You can use TrueTrace to filter the results based on the
quality of the phone number and the phone type. For example, some collectors
use TrueTrace specifically to find high-quality mobile numbers — competing
products might deliver every number regardless of its quality or type.

Email append

Email append is similar to skip
tracing for phone numbers. We can validate email addresses that collectors have
in their accounts to determine if the address:

• Is deliverable
• Has easily correctable typos
• Is a work email address

You can then scrub your accounts to filter out email
addresses that you shouldn’t use. Experian also has access to approximately two
billion email addresses that are regularly evaluated for permissions. We can
help you find and append new emails to accounts to improve digital outreach
strategies.

READ: What To Know When Adding Email to Collections

Collection Triggers℠

Collection Triggers is a flexible monitoring tool
that can alert you to predictive changes in consumers’ credit profiles and enables
a data-driven approach to prioritization.

For example, the daily report
could highlight consumers who applied for, or opened, new credit accounts or
consumers who settled or brought other accounts current. These changes can
indicate a consumer’s finances are on the rebound, allowing you to prioritize those
who are more likely and able to make a payment.

You can choose from nearly 100
triggers to monitor, including changes to a consumer’s phone number, address,
and employer.

While consumers rarely update
their contact information with Experian directly, we receive new information through
furnished trades and inquiries. Passively monitoring for these changes allows
you to avoid having to repeatedly skip trace older accounts and minimize lost
time.

TIP SHEET: Strengthening Your Debt Collection Strategy

Why partner with Experian?

Experian has worked with
collection agencies and debt buyers for years to understand their challenges
and develop effective solutions. We’ve gone from skip tracing solutions that
relied on physically mailing collectors updated reports to monitoring and
verifying information on millions of consumers in real time.

Today, we see debt collectors
and agencies leverage Phone Number ID, TrueTrace, Email append and Collection
Triggers to create effective and compliant skip tracing strategies. These
affordable tools are easy to integrate with existing collection systems. And
the results allow organizations to optimize and scale operations without expanding
their workforce.

Learn more
about Experian’s Skip Tracing Solutions.

On February 6, the FTC announced two orders (here and here) that will ban a group of student loan debt relief “scammers” (defendants) from the debt relief industry. As previously covered by InfoBytes, defendants allegedly misled consumers by charging them for services that are free through the Department of Education, claiming consumers needed to pay fees or make payments to access federal student loan forgiveness. As a consequence, the FTC filed a temporary restraining order resulting in an asset freeze, among other things.  

As a result of the FTC’s action, and subject to court approval, defendants are banned from operating in the debt relief industry, as well as prohibited from making false statements about financial products or services and from using deceptive tactics to gather consumers’ financial information. Moreover, the proposed orders include a monetary judgment of $7.4 million, with a significant portion suspended due to financial constraints. Defendants must surrender personal and business assets, and if any of them materially misrepresent their finances, the entire monetary judgment will become immediately payable.  

On January 22, 2034, NYDFS issued an industry letter titled “Guidance on Assessment of the Character and Fitness of Directors, Senior Officers, and Managers” for banks and other financial institutions (Covered Institutions) to notify them of NYDFS’s expectations. The final guidance came after a review process conducted over the past year where twenty comments indicated the need for Covered Institutions to build “robust character and fitness” policies. NYDFS asked that these Covered Institutions develop and maintain a framework to vet senior officials’ character and fitness during onboarding and on a regular basis.

According to the guidance, each Covered Institution is expected to “define sensitive issues, warning signs, and other indicators” that would be cause for concern. The depth and nature of each Covered Institution’s assessment is tailored to each institution, and the guidance does not demand a defined period for the review, but NYDFS supplied a list of suggested questions for Covered Institutions to use as best practices for vetting key individuals. (These questions are not mandated, however.) NYDFS noted that Covered Institutions are expected to review materials related to the character and fitness assessment of key persons. The guidance’s appendix lists suggested questions, including whether the key person has reviewed and understood pertinent policies and whether the interviewee has ever been charged or convicted of a crime or has previously been sanctioned or censured by a securities regulator. 

SACRAMENTO, Calif. — The Receivables Management Association International celebrated its 27th Annual Conference in Las Vegas, February 5-8, 2024. RMAI was pleased to host this popular conference which attracted more than 1,400 attendees this year. RMAI took the opportunity to present its annual awards, recognizing leaders in the receivables management industry.

Bud Reitzel Award

The RMAI Board of Directors awarded the Bud Reitzel Lifetime Commitment Award, the industry’s highest recognition, to Vincent Iacono, President/CEO of TRAKAmerica.

RMAI created the Reitzel Award to recognize an individual for outstanding leadership and dedication in the receivables management industry who has demonstrated, over many years of service, the ideals that Bud modeled and believed in.

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Vinnie Iacono is a dynamic and proven executive with over 20 years of leadership in the credit and collections space. He uses his deep relationships in the recovery space to drive new business growth and deepen relationships with existing TRAKAmerica clients.  Prior to joining TRAKAmerica, Vinnie was the ALS Executive of the Recovery and Risk Operations division for Bank of America. He has been described as a leader and mentor within his company, and an engaged leader with collaborative partnerships throughout the industry.  He is involved with trade organizations and works to foster the next generation of leaders.

“Vinnie has had a powerful and positive impact on so many throughout his career,” said RMAI Board President Anne Thomas.  “He is an icon in the industry who has fostered collaborations to achieve tremendous results.”

President’s Award

RMAI awarded the President’s Award to David Reid, General Counsel for the Receivables Management Association International (RMAI). In this capacity, David manages the legal, state legislative, regulatory, and advocacy activities of the association. David also serves as staff liaison to the RMAI Certification Council and its Standards and Remediation Committees. David is a graduate of Canisius University and Albany Law School. He is admitted to the California, New Jersey, and New York bars.

In 2017, RMAI created the President’s Award which recognizes an individual for outstanding contributions and services to the association and membership. The award goes to someone serving on an RMAI Committee who is selected because of their contribution to committee goals and their innovative ideas helping further the success of RMAI.

Integrity Award

RMAI awarded the Integrity Award to Don Maurice, a partner at national financial services law firm Maurice Wutscher, LLP. For nearly 30 years, Don has counseled the financial services industry in defense and compliance matters. He has litigated in bench and jury trials in both individual and class actions, appearing before federal Circuit Courts of Appeals and as amicus counsel before the U.S. Supreme Court. Don is peer-rated AV Preeminent by Martindale-Hubbell, the worldwide guide to lawyers. His prior firm was named a “Go-to Law Firm for the Top 500 Companies” and a “Go-to Financial Law Firm” by Corporate Counsel.

The Integrity Award is RMAI’s award which recognizes an individual from an RMAI member company for demonstrated integrity in action, either professionally or personally. The recipient of this award is an individual who has demonstrated integrity through specific actions which have contributed positively to the receivables management industry or the individual’s community.

About RMAI

Receivables Management Association International (RMAI) is a nonprofit trade association representing more than 600 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The RMAI Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to the rigorous uniform standards of best practice which focus on protecting consumers. More information about RMAI is available at www.rmaintl.org.

RMAI’s 2024 Annual Conferencebrings together stakeholders in the receivables management industry—welcoming attendees and exhibitors, presenting highly-respected educational programming, and numerous networking opportunities with key participants, including debt buying companies, collection law firms, collection agencies, brokers, vendors, major creditors, and international members.

The debt purchaser in In re McIntosh argued that because it was enforcing a debt that was not listed correctly on the debtor’s bankruptcy schedules, it was entitled to assume the debt had not been discharged. The U.S. Bankruptcy Court for the Southern District of Florida disagreed and entered an award of sanctions in the total amount of $64,686.93 — including $10,000 for emotional distress and over $21,000 in punitive damages.

As background, in 2002, the debtor and her then-spouse jointly filed a “no asset” Chapter 7 bankruptcy petition. She listed 45 unsecured creditors in her schedules of assets and liabilities, including the $7,400 credit card debt at issue. However, testimony later showed that the entity listed as holding the debt, Direct Merchants Bank, was not the actual creditor but rather a registered trademark owned by Metris Companies. Metris Companies was not listed in the debtor’s schedules. Because this was a “no asset” case, meaning there was no non-exempt property available for distribution to creditors, under Federal Rule of Bankruptcy Procedure 2002(e) no deadline to file proofs of claim was ever set.

Five months after the debtor received her discharge, Metris Companies assigned the credit card debt to Florida Credit Research, which sued the debtor in state court and received a judgment in its favor. Nineteen years later, the debt buyer filed a motion for proceedings supplementary to execution in state court to collect on the judgment. Prior to filing its motion, the debt buyer did not conduct a search for bankruptcy filings. A few days after filing its motion, the debt buyer served a writ of garnishment on three of the debtor’s accounts for the credit card debt, which by then had grown to $24,839.19.

After being contacted by the debtor and put on notice of her decades-old bankruptcy, the debt buyer nonetheless filed a motion for final judgment in garnishment in state court. In its motion, it asserted that because neither it nor the entity from which it acquired the debt was listed as a creditor in the bankruptcy, the debt was an “unscheduled debt” that was not discharged.

The debtor then moved to reopen her bankruptcy case and filed a motion for sanctions against the debt buyer. The same day a hearing was set on the debtor’s motion, the debt buyer filed a voluntary dissolution of its writ of garnishment. Yet, at the hearing on the motion for sanctions, the debt buyer argued that because it was enforcing a debt that it did not see listed on any bankruptcy schedules, it could safely assume the debt was an unscheduled debt that was not discharged, and if the debtor contended otherwise, it was her burden to prove so.

The court found this argument contrary to the plain text of the Bankruptcy Code. Despite the common misperception that unscheduled debts are not discharged in bankruptcy, that is only true in “asset” cases, where Bankruptcy Code § 523(a)(3)(A) excepts from discharge unscheduled debts in order to permit creditors to timely file a proof of claim.

In a “no asset” case, however, proofs of claim are not filed, so it is irrelevant whether a creditor’s claim is scheduled or the creditor has notice or knowledge of the bankruptcy. In other words, even though the debtor had not correctly listed the credit card debt on her bankruptcy schedules, it was still discharged as a matter of law.

The court held that “there [was] simply no fair ground of doubt that this debt was discharged,” and characterized the debt buyer’s conduct as “egregious and reprehensible,” showing “a reckless or callous disregard for the law or rights of others.”

Takeaway

Any entity seeking to collect a debt should first perform a PACER search for bankruptcy filings, and should be aware that a debt does not need to be scheduled correctly (or at all) in a no-asset chapter 7 bankruptcy case in order to be discharged.

ROCHESTER, N.Y. –Continental Service Group, LLC d/b/a ConServe, is proud to announce that Pamela Baird, ConServe Chief Executive Officer was selected by the Rochester Business Journal’s editorial team as one of “Rochester’s power players” for their 2024 Power 100 list.

The Power 100 list is a platform for honoring and showcasing Rochester’s top leaders who are actively transforming their organizations, driving change, and making an impact in their community. This list of business leaders, CEOs, lawyers, and public officials are the ones that others look up to and aspire to emulate. These leaders are making significant strides in the economy, inspiring success and innovation in the process.

Pam has been with ConServe for more than 16 years and is an accomplished attorney, fully armed with the experience, knowledge, and commitment to drive on-going success and growth. On March 3, 2023, Pam became ConServe’s Chief Executive Officer, taking ownership of the company. She remains resolute in her commitment to ConServe’s employees, Clients and their Consumers, as she continues to leverage her experience to enhance the company’s reputation in the accounts receivables industry.  

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About ConServe:

ConServe is a top-performing accounts receivable management service provider specializing in customized recovery solutions for their Clients. Anchored in ethics and compliance, and steadfast in their pursuit of excellence, they are a consumer-centric organization that operates as an extension of their Clients’ valued brands. For over 38 years, they have partnered with their Clients to provide unmatched customer service while simultaneously helping them achieve their accounts receivable management goals. Visit us online at: www.conserve-arm.com 

About Rochester Business Journal (RBJ)

Since 1987, the Rochester Business Journal has been a leading source of business news and information in Rochester, New York. To learn more about he RBJ and the RBJ 2024 Power 100, visit them online at:  https://rbj.net/2024/02/09/rbj-presents-the-2024-power-100/

SACRAMENTO, Calif. — Members of Receivables Management Association International (RMAI) elected Officers and Directors to its Board for 2024. Of the ten-member Board, eight are continuing service from the previous year. The 2024 Officers and Directors are:

• Brett Soldevila, Security Credit Services, LLC, President
• Jon Mazzoli, Resurgent Holdings, Inc., President Elect
• Brian Williams, Crown Asset Management, LLC, Treasurer
• Amber Russo, Kino Financial Co., LLC, Secretary
• Anne Thomas, Cavalry Portfolio Services, Past President
• Joe Barbito, Orbita Capital Group, LLC, Director
• Kelly Knepper-Stephens, TrueAccord, Director
• Andrew J. Roskam, Acctcorp International, Inc/Accounts Receivable, Inc., Director
• Mellisa Massey, National Credit Adjusters, Director
• Todd L. Gurstel, Gurstel Law Firm, P.C.

Mellisa (“Missy”) Massey is joining the RMAI Board of Directors for 2024, in the certified debt-buyer seat. She is the Director of Business Development for National Credit Adjusters, LLC, and has over 20 years of experience as a credit and risk professional in collections leadership and service provider network management from the credit issuer, 3rd party forwarder and debt buyer perspectives.  Prior to joining NCA, Missy specialized in managing large-scale recovery operations – specifically law firm servicing and litigation strategies for Jaffe & Asher LLP, Portfolio Recovery Associates and Target Corporation.

Missy said of her goals for the future, “With a clear understanding of the association’s objectives and the need for strong leadership, it’s not just my responsibility to step in and contribute to ensure continuity and unity for future generations – it will be my honor to encourage tomorrow’s leaders.”

Todd Gurstel is joining the RMAI Board of Directors for 2024, in the certified law firm seat.  Todd is the founder of Gurstel Law Firm, P.C., which is a multi-state litigation law firm that represents businesses in all aspects of litigation through the judgment collection phase. Since 1987, Todd has focused his practice on credit collection, is a recognized leader within the Creditors’ Rights industry, and is known for regularly setting and sharing best practice standards.

Todd shared his hopes for contributing to RMAI, saying, “Given my 26 years of experience running Gurstel Law Firm from its very beginnings to one of the leading creditors rights law firms in our industry, I will be able to provide all certified law firms the representation needed on the board.”

The RMAI Board of Directors is committed in 2024 to forming and maintaining close relationships with member companies, while achieving a smooth transition to the new RMAI Executive Director. The RMAI Certification Program continues to evolve as the industry faces new challenges and requirements. In 2024, RMAI will assist Associate Debt Buyer members in meeting the new requirement to achieve a Certified Receivables Business designation by January 1, 2025. Starting in 2024, BBB National Programs will independently administer the Remediation Committee for RMAI’s Receivables Management Certification Program (RMCP), to further advance the program.

RMAI will also continue its robust advocacy work.  “We continue to advocate at the state and federal levels on behalf of the industry, while building relationships and educating decision makers before issues arise rather than after,” said Jan Stieger, Executive Director of RMAI.  “In addition to our advocacy, we look forward to holding our Executive Summit at the Hyatt Regency Tamaya in Santa Ana Pueblo, New Mexico.”

About RMAI

Receivables Management Association International (RMAI) is a nonprofit trade association representing more than 600 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The RMAI Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to the rigorous uniform standards of best practice which focus on protecting consumers. More information about RMAI is available at www.rmaintl.org.

RMAI’s 2024 Annual Conference brings together stakeholders in the receivables management industry—welcoming attendees and exhibitors, presenting highly-respected educational programming, and numerous networking opportunities with key participants, including debt buying companies, collection law firms, collection agencies, brokers, vendors, major creditors, and international members.

In this article, we share a list of the top 10 biggest fines and penalties from our monthly bites for 2023.

Bite 10: CFPB Orders Installment Lender to Pay $20 Million

On May 31, 2023, the CFPB ordered an installment lender to pay $20 million for alleged deceptive sales practices. According to the CFPB’s claims, the lender expected its employees to upsell add-on products to borrowers on every loan, and incentivized employees to push more add-on products, even when consumers had already declined the products on previous loans. Allegedly, salespeople could be fired for failing to sell enough add-on products. The CFPB also claims that the lender failed to refund interest charged to 25,000 consumers within a “full refund period” and deceived borrowers about their need to purchase add-on products to receive a loan. The lender will pay $10 million to consumers and an additional $10 million penalty to the CFPB’s civil penalty fund. The CFPB will also require the lender to adjust its policies to make cancellation of add-on products easier, double the period in which a consumer can cancel an unused add-on product without cost (from 30 to 60 days), and include interest in refunds after add-on product cancellations at any time.

Bite 9: CFPB and FTC Require Rental Screening Organization to Pay $23 Million

On October 12, 2023, the CFPB and the FTC announced actions against a rental screening organization, for violations of the Fair Credit Reporting Act. The CFPB and FTC have alleged that the subsidiary failed to take steps to ensure the rental background checks were accurate and withheld the names of third parties providing information from renters. Together, the agencies have requested that a federal court order the company to pay $15 million and make changes to how it reports evictions. The CFPB separately ordered the organization to pay $8 million for allegedly lying to consumers about security freezes and locks on the credit reports. According to the CFPB, the organization told consumers the requests were completed when they were actually placed into a years-long backlog. The joint action by the CFPB and the FTC against the rental screening subsidiary included allegations that the company failed to take steps to produce accurate reports, including failing to share updated information that evictions had been dismissed, and permitting the inclusion of sealed records and multiple entries about the same case. The organization also allegedly failed to identify who provided inaccurate information, leaving tenants unable to contact the provider to correct the inaccuracies. If entered by the court, the organization will pay $11 million to harmed consumers along with a $4 million penalty into the CFPB civil penalty fund.

Bite 8: CFPB Orders Debt Collector to Pay More Than $24 Million Related to Debt Collection and Consumer Reporting

On March 23, 2023, the CFPB ordered a debt collector to pay more than $24 million for allegedly violating a 2015 CFPB order, divided evenly between consumer restitution and a civil penalty to be deposited into the CFPB’s victims relief fund. The CFPB claims the collector collected unsubstantiated debt, failed to provide required documentation and disclosures, sued or threatened to sue without the required documentation, and sued consumers after the statute of limitations had passed. In addition, the CFPB claimed the collector violated the Fair Credit Reporting Act by failing to inform consumers about investigation outcomes, failing to timely resolve disputes, and conducting unreasonable investigations. The 2015 order required the debt collector to pay more than $27 million in consumer refunds and penalties for allegedly unlawful debt collection activities. The CFPB’s new proposed order will require the debt collector to pay $12 million to consumers and an additional $12 million to the CFPB’s civil penalty fund, improve operations, and fix alleged failures to respond to consumers.

Bite 7: CFPB Penalizes Payment Firm $25 Million

On June 27, 2023, the CFPB issued an order claiming that a payment processor improperly initiated approximately $2.3 billion in unlawful mortgage payment transactions, which could have subjected up to 500,000 homeowners to overdraft and NSF fees from their financial institutions. In April of 2021, the payment firm had conducted tests of its platform, but allegedly sent several files filled with actual customer data into the ACH network, accidentally initiating approximately $2.3 billion in electronic payment transactions from homeowners’ accounts without notice or authorization. At one bank, for example, more than 60,000 accounts reportedly experienced more than $330 million in combined unlawful debits. Among these account holders, approximately 7,300 had their available balances reduced by more than $10,000. The CFPB claims that these actions violated Regulation E, and in addition to a $25 million penalty, the CFPB required the company to change its security and testing practices so that it does not happen again.

Bite 6: CFPB Orders Large Bank to Pay $25.9 Million for Discrimination

On November 8, 2023, the CFPB announced that a large bank would pay $25.9 million in fines and redress for violating the ECOA by allegedly discriminating against Armenian Americans. From 2015 through 2021, the bank was alleged to have targeted applicants with surnames that employees associated with Armenian national origin as well as applicants in or around Glendale, California because the bank allegedly stereotyped this group as being likely to commit crime and fraud. The bank specifically targeted surnames ending in “-ian” and “-yan,” and Glendale, which is home to approximately 15% of the Armenian American population in the United States. According to the CFPB, supervisors at the bank conspired to hide the discrimination by instructing employees not to discuss the discriminatory practices in writing or on recorded phone lines, and employees lied about the basis of denial, providing false reasons to denied applicants. The CFPB also asserted that the bank denied Armenian American consumers outright, requiring additional information or placing a block on the account. The bank was required to pay $1.4 million to affected consumers and a $24.5 million fine to the civil penalty fund.

Bite 5: CFPB Enters $35.6 Million Settlement with a Leasing Company

On September 11, 2023, the CFPB and 41 states, plus the District of Columbia settled an action involving a leasing company, requiring payment of $36 million in penalties and relief. The CFPB had alleged that the company tricked consumers into expensive leasing agreements by concealing the contract terms and costs, as well as failing to provide legally required disclosures. The CFPB alleged that in addition to concealing the terms of the lease agreements and failing to provide the disclosures required by Regulation M, the company trapped consumers with unreasonable return practices. The CFPB’s order required the company to release consumers from existing agreements, which represented approximately $33.6 million in released payments, pay an additional $2 million penalty to the civil penalty fund and settling states, and permanently cease leasing activities.

Bite 4: CFPB and OCC Penalize Large Bank $35.7 Million

On December 19, 2023, the CFPB and OCC announced an action against a large bank. The CFPB claimed that the bank kept consumers from accessing their unemployment benefits. The bank allegedly froze tens of thousands of accounts without providing the customers with a reliable and quick way to regain access and failed to provide provisional account credits while investigating potentially unauthorized transfers. These alleged actions happened during the pandemic, while the bank had contracts with at least 19 states to deliver unemployment benefits. The consumers whose accounts were frozen lost access to their benefits until they were able to verify their identities to unfreeze their accounts, but the bank allegedly did not have a system in place for the identity verification. According to federal law, when accountholders report unauthorized transfers, banks must provide provisional account credits if their investigations take more than 10 days, and the CFPB and OCC alleged that this bank failed to provide those credits. The CFPB required the bank to pay $5.7 million to consumers, a $15 million penalty to the civil penalty fund, and change its practices regarding limiting account access and issuing provisional credits. The OCC also separately fined the bank an additional $15 million.

Bite 3: CFPB Orders Auto Finance Company to Pay $60 Million

On November 20, 2023, the CFPBannounced that it ordered one of the nation’s largest indirect auto companies to pay $48 million in redress to harmed consumers and a $12 million penalty to the civil penalty fund. The order follows allegations that the company prevented borrowers from cancelling products sold with the vehicle, failed to provide proper refunds, and reported incorrect information to credit bureaus. The product included GAP waivers, credit life and health insurance, and extended service contracts, which cost between $700-$2,500 per transaction. According to the CFPB, thousands of consumers complained to the auto finance company that their dealers had lied to them about whether these products were mandatory, included them on contracts without the borrowers’ knowledge, or rushed through paperwork to hide buried terms. The CFPB says that despite these complaints, the company made it difficult to cancel these products and failed to fully refund those consumers who were able to cancel. The CFPB alleged that the company directed consumers to a cancellation hotline that would not accept a cancellation request, delayed refunds by applying the amounts to principal payments, withheld refunds, and furnished false data about delinquent payments to consumer reporting companies. In addition to the monetary penalties, the CFPB ordered the Company to cease such practices.

Bite 2: CFPB and OCC Impose $90 Million in Penalties Against Large National Bank

On July 11, 2023, both the CFPB and the Comptroller of the Currency (OCC) took action against a large national bank, ordering payment of more than $100 million to customers and $150 million in penalties. The CFPB alleged the bank was “double-dipping” on fees, withholding credit card rewards, and opening accounts without authorization. The OCC also claimed that the bank’s fee practices were illegal. The agencies allege that the bank had a policy of charging customers $35 for insufficient funds and allowed these fees to be repeatedly charged for the same transaction. The CFPB also claims that the bank withheld promised credit card account bonuses, such as cash rewards or bonus points, to tens of thousands of consumers, and denied sign-up bonuses due to system failures. The bank also allegedly opened credit card accounts without consumers’ knowledge and obtained credit reports to do so. As a result, the agencies required the bank to stop repeat offenses, pay redress to consumers, pay a $60 million penalty to the OCC, and pay a $30 million penalty to the CFPB.

Bite 1: CFPB Announces $2.7 Billion Settlement with Credit Repair Conglomerate

On August 28, 2023, the CFPB announced a $2.7 billion settlement agreement with a group of credit repair providers. The settlement followed a court ruling in March of 2023 that the entities violated federal law by collecting illegal advance fees for credit repair services through telemarketing. Following the ruling, the companies filed for Chapter 11 bankruptcy protection and represented that they have shut down about 80% of their business. Besides paying a $2.7 billion dollar judgment, the CFPB also banned the companies from telemarketing credit repair services for 10 years. The CFPB required the companies to send a notice of the settlement to any remaining enrolled customers about the case and about canceling the service.

Also note there were at least 10 significant fines below the $20 million amount reflected as the lowest amount in Bite #10 above. So, several smaller companies also paid fines that were significant amounts for them in 2023. We expect that trend to continue in 2024, with the CFPB pursuing larger companies with larger fines, and numerous smaller companies with commensurate fines as well.

Still hungry? Please join Hudson Cook for our next CFPB Bites of the Month. If you missed any of our prior Bites, including the webinar that covered the above topics, request a replay on the Hudson Cook website here. 

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This article is provided for informational purposes and is not intended nor should it be taken as legal advice.  The views and opinions expressed in this article are those of the authors in their individual capacity and do not reflect the official policy or position of the partners of Hudson Cook, LLP or clients they represent

On January 25, the FTC hosted a virtual tech summit focused on artificial intelligence (AI). The summit featured speakers from the FTC––including all three commissioners––software engineers, lawyers, technologists, entrepreneurs, journalists, and researchers, among others. First, Commissioner Slaughter spoke on how there are three main acts that led to where we are today in creating guardrails for AI use: first, the emergence of social media; second, industry groups and whistleblowers rang the alarm on data privacy and forced regulators to play catch-up; third, regulators must now urgently grapple with difficult social externalities such as impacts on society and political elections.

The first panel discussed the various business models at play in the AI space. One journalist spoke on the recent Hollywood writers’ strike, opining that copyright law is a poor legal framework by which to regulate AI, and suggested labor and employment law as a better model. An analyst at a venture capital firm discussed how her firm finds investment opportunities by reviewing which companies use a language-learning model, as opposed to the transformer model, which is more attractive to that firm.

Before the second panel, Commissioner Bedoya discussed the need for fair and safe AI, and said that in order for the FTC to be successful, it must execute policy with two topics in mind: first, people need to be in control of technology and decision making, not the other way around; and second, competition must be safeguarded so that the most popular technology is the one that works the best, not just the one created by the largest companies.

During the second panel, a lawyer from the CFPB spoke on how the CFPB is doing “a lot” with regards to AI, and that the CFPB gives AI technology no exceptions in the laws it oversees. The CFPB recently issued releases on how the “black box” model in credit decision making needs to be fair and free from bias. When discussing future AI enforcement actions, the CFPB lawyer said in a “high-level” way that AI enforcement is currently “capacity building”; they are building out their resources to be more intellectually diverse, including having recently created their technologist program.